Ukraine Crisis Aggravates Italy's Addiction to Foreign Oil
by Fernando Napolitano Founder and CEO of Newest Corp
The winds of war coming from a West-East confrontation over Ukraine are serious and, hopefully, just fears. Paraphrasing a cliché in detective fiction, “Cherchez la femme, pardieu!”, leaders must find a compromise. The U.S- Soviet Union 13-day military standoff in 1962 ended with one. While the Soviets removed the missiles from Cuba, in exchange, the US secretly agreed to remove U.S. missiles from Turkey.
Meanwhile, tensions are already proving very expensive for Italians. January-March 2022 confirms the growth trend in energy prices, with dizzying peaks: + 55% for electricity and + 41.8% for methane gas. The government has intervened with tax cuts. Yearly, Italy needs 70 billion cubic meters (CB) of gas and of these only 4.1 billion, about 6%, come from domestic extraction. The national transportation network has 9 entry points importing from Russia, Northern Europe and North Africa.
Russia remains Italy’s main gas provider accounting for 41% of total imports. Russian gas passes through Ukraine. Furthermore, 6% arrives from Libya which, in turn, is plunging into a civil war. An additional 21.5% is imported from Algeria. This energy dependence makes Italy very vulnerable economically and geo-politically.
In the Italian seas, however, there are more than 100 platforms floating on 98 billion CB of gas reserves. Here is where the two-faced Janus Italy reappears: Italy extracted 20 billion CB of gas between the 90s and immediately after 2000. Draghi’s government is now enacting legislation to cut red tape to have platforms extracting at full speed. It is estimated that with the contribution of the new Eni’s Sicilian platforms Italy might extract 10 billion CB of gas in three years.
While Italy enjoys the efficacy and vision of populist policy making, Italian companies – energy producers and energy users - now have an opportunity to break the addiction to the risky foreign supply. They can create a realistic understanding and culture among stakeholders of what needs to be done and the compromises and sacrifices required to become less energy dependent.
Since 2001, the Edelman Trust barometer analyzes global citizens’ trust in 4 key constituencies: governments, corporations, NGOs and media. Corporations are, today, the most trusted institution. The 2022 edition reveals that 81% of interviewees say that CEOs should be personally visible when discussing public policy with external stakeholders or the work their company has done to benefit society. Furthermore, 76% expect CEOs to inform and shape conversations and policy debates on jobs and economy.
The above – distrusted governments and trusted corporations—is a malaise of Western democracy. Top capital providers, especially from the US, are now very outspoken recognizing that sustainability, while commendable and good business, is not enough to fill the void left by politics. Italy, with Mario Draghi, might represent the exception. The saga of foreign supply vs domestic extraction of gas will be a revealing test for companies, as well.
NEWEST will be following the evolution closely.